Puerto Rico Economic Pulse ©

03/2018: Tic-Tac-Toe – Game Changer

Hurricane Maria changed Puerto Rico’s economic forecast

Tic-Tac_ToeDespite geopolitical tensions between the US and North Korea, most of the world and the US posted gains in real economic growth during FY2017. On November 2016, President Trump was elected in the US and Governor Rosello was elected in PR. A lot has happened since then: a US Congress mandated oversight fiscal board with ample powers over the Island; two hurricanes in September 2017 that left destruction and devastation in an economy already in economic depression; destruction of infrastructure, and a flurry of reforms and fiscal plans. Economic recovery in PR will take many years; require billons of disaster monies; and a transformation of our economy towards other key sectors, besides manufacturing. Governance has become more complex with clashes between the PR Government and the Oversight Fiscal Board. The impossible occurred when bankruptcy proceedings for PR under Title III of PROMESA began in May 2017. Find out how Tic-Tac-Toe impacts Puerto Rico’s economic outlook.

Puerto Rico Economic Pulse ©

02/2018: Out With the Old, In With the New – Part II

The Government’s Revised Fiscal Plan stumbles on assumptions

Out with the Old In with the NewEconomic modeling is both science and art. Failure to take this seriously leads to wrong decision-making scenarios in PR. If that was acceptable in the past, it is not at present. Old ways relied on a relatively stable population to forecast growth and fiscal revenues. As per the revised fiscal plan, this appears not to be the case. Old ways relied on government revenues forecasted, in many cases, as trend of past collections. Now, these revenues must be tied to demographics and economic growth in the aftermath of hurricane Maria. Old ways relied on GNP growth forecasts by the PR Planning Board. Now, the forecasts in the fiscal plan need to use a coherent economic model of PR’s economy rather than mere assumptions with irreconcilable results. This issue questions the assumptions and results of the most recently revised Central Government Fiscal Plan.